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James Li
James Li
Articles (865)  | Author's Website |

Julian Robertson Buys Adobe and Sells Apple in 1st Quarter

Guru adds 3 positions and closes 3 others

Julian Robertson (Trades, Portfolio), founder of Tiger Management, invests with long-short strategies. During the first quarter, the guru added positions in Adobe Systems Inc. (NASDAQ:ADBE), Boston Scientific Corp. (NYSE:BSX) and JPMorgan Chase & Co. (NYSE:JPM). On the sell side, Robertson divested his holdings in HollyFrontier Corp. (NYSE:HFC), Apple Inc. (NASDAQ:AAPL) and Shire PLC (NASDAQ:SHPG).

Adobe Systems

Robertson invested in 220,000 shares of Adobe for an average price of $117.37. The investor increased his portfolio 5.4% with this transaction.

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The San Jose, California application software company has a profitability rank of 8, suggesting high growth potential. Adobe reported net revenues of $1.682 billion for the fiscal quarter ending March 3, outperforming fiscal first-quarter 2016 revenues by approximately $300 million. Chief Financial Officer Mark Garrett reported that Adobe “achieved record revenue, profit and cash flow” for the company’s fiscal first-quarter in 2017, driven by “solid execution and business momentum” within the company. Operating income and net income increased 52% and 57%, which led to profit margins outperforming over 90% of global competitors. Adobe’s Piotroski F-score is an excellent 8 out of 9.

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Boston Scientific

The Tiger Management pioneer invested in 900,000 shares of Boston Scientific for an average price of $24.32. With this transaction, Robertson expanded his portfolio 4.22%.

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Boston Scientific’s margins and returns are near a 10-year high even though the company’s profitability ranks a modest 5 out of 10. The Massachusetts medical equipment company reported a 10% year-over-year increase in net sales and a 9% year-over-year increase in organic revenues for the quarter ending March 31. Despite this, the company’s margins and returns outperform just over 58% of global competitors.

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JPMorgan

Robertson purchased 174,800 shares of JPMorgan for an average price of $88.22 per share. The guru increased his portfolio 2.9% with this transaction.

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JPMorgan reported higher revenues in each of the company’s business segments for the first quarter, including record net income and investment banking fees in the Commercial and Investment Banking (CIB) segment. The company maintained its top ranking for Global Investment Banking fees with 8.5% wallet share. These revenue results contributed to expanding operating margins, which are near a 10-year high of 36.35%.

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HollyFrontier

Robertson sold his 638,000-share position in HollyFrontier for an average price of $29.20 per share. The guru trimmed 3.79% with this transaction.

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The Dallas petroleum refiner has a poor profitability rank of 4, suggesting low growth potential. HollyFrontier reported a net loss of $33.50 million excluding special items of a net negative $12 million during the quarter ending March 31. The net loss is driven by lower product sales and higher operating expenses from the prior-year quarter.

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Apple

Robertson divested 171,000 shares of Apple for an average price of $131.33. The guru pared 3.59% of his portfolio with this transaction.

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According to a previous article, Third Point manager Daniel Loeb (Trades, Portfolio) also closed his Apple position during the quarter, selling 1.85 million shares in the tech giant.

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Although the Cupertino, California electronics company has high profitability, Apple has issued new long-term debt over the past three years, including $7 billion in debt according to a May 11 current report filing with the SEC. Apple’s long-term debt to assets ratio increased 2% from March 2016-17, suggesting that Apple is progressively becoming more dependent on debt to grow its business.

Shire PLC

Robertson sold 95,454 shares of Shire for an average price of $174.68. The guru trimmed 2.95% of his portfolio with this transaction.

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Shire reported a 9% year-over-year decrease in operating income, driven by higher expenses from the unwind of inventory fair value adjustments and amortization of acquired intangible assets. GAAP net earnings per diluted share tumbled 42% as Shire increased its shares outstanding from the acquisition of Baxalta Inc. (NYSE:BXLT).

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The Dublin biotech company has four severe warning signs, including declining operating and gross margins. Shire also has poor Altman Z and Beneish M scores, the former implying high bankruptcy risk and the latter suggesting possible earnings manipulation.

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See also

Robertson, considered the “Father of Hedge Funds,” mentored a group of managers known as the “Tiger Cubs.” Some successful gurus include John Griffin (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio) and Steve Mandel (Trades, Portfolio). Premium members have access to over 150 gurus, including the gurus mentioned above. The GuruFocus Premium membership also gives access to value screeners and the aggregated portfolio of gurus. If you are not a member, we invite you to sign up for a free seven-day trial.

Disclosure: The author has no positions in the stocks mentioned in the article.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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